Tuesday, January 18, 2011

AnnTaylor Stores' (NYSE:ANN) Product, Not Promotion, Driving Business

Management of AnnTaylor Stores (NYSE:ANN) says the store is being driven by product and not promotions, signifying costs are being managed, and margins and earnings should hold up.

FBR says, "ANN shares have been under pressure recently after a competitor's downgrade and a negative guidance revision by Talbots (NYSE:TLB). It sounds to us like the Ann Taylor Stores division continues to outperform. Management's tone was upbeat on the product at the ATS division and noted that the business has been driven by strong product, not promotion. Loft continues to be a work in progress, but we did not get the sense trends have worsened. Management continues to believe the issues are merchant in nature, not design issues or problems with the overall creative vision or direction. Furthermore, Kay Krill and Gary Muto have both been more closely involved in the merchandising for Spring and thus improvement is expected. Additionally, the company brought back a former Loft merchant just this week as GMM. She will take over where Kay and Gary have been standing in.

"We continue to believe the company has been actively repurchasing its stock. We think management will likely guide more conservatively than our 2011 EPS estimate of $1.98 as they are typically conservative."

FBR Capital maintains an "Outperform" rating on AnnTaylor Stores, which closed Friday at $23.77, losing $0.13, or 0.54 percent.

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